Exploratory Assessment of Cognitive and Emotional Biases in Investment Behaviour: Insights into Psychological Influences through Factor Analysis

This study investigates the influence of behavioural biases and subjective risk perception on investment decision-making within Kolkata's financial community. Traditional finance theories, which assume rational investor behaviour, often fail to address psychological factors influencing financial decisions. Behavioural finance, rooted in Prospect Theory and other frameworks, emphasizes the roles of cognitive biases, framing effects, and subjective risk in shaping investment behaviours. A mixed-methods approach was used, integrating quantitative data from respondents and qualitative insights through ethnographic methods and focus group discussions. Data collection employed structured questionnaires with demographic and psychological factors measured using a 5-point Likert scale. The findings highlight demographic variations, psychological biases, and perceived risks as key determinants of investment decisions. Exploratory Factor Analysis revealed latent psychological factors influencing behaviour. This study bridges a research gap by contextualizing behavioural finance theories in Kolkata, offering actionable insights for local financial professionals and contributing to the broader field of behavioural finance.